Full-Time Vs. Part-Time Workers: Restaurants Weigh Obamacare

The California Tortilla chain is one company still deciding how to react to the new health care requirements for business, set to take effect next year.

John YdstieNPR

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Originally published on July 24, 2013 5:21 pm

Many businesses that don't offer health insurance to all their employees breathed a sigh of relief earlier this month when they learned they'd have an extra year to comply with the new health care law or face stiff penalties.

President Obama delayed the requirement for businesses with 50 or more employees after complaints that the plan was too complicated to implement by the original deadline, January 2014. Now, the restaurant industry, which employs a lot of part-time employees, is weighing strategies for how to respond.

At a California Tortilla restaurant in downtown Washington, D.C., managers say they're still figuring out what strategy to use to comply with the new law's mandate to provide health insurance for all workers who put in at least 30 hours a week: whether they should trim hours, hire more part-timers or leave things unchanged.

But management at another fast-food chain has made a decision. White Castle decided it will not fire full-time employees or cut benefits as a result of the new health care law, says Vice President Jamie Richardson. These full-time employees, who make up roughly half of White Castle's 9,600-member workforce, are already covered by the company's health care plan.

"If you're full-time at White Castle, you're going to stay full-time at White Castle," Richardson says. But as White Castle looks into the future after the new law takes effect, Richardson says the company is considering hiring only part-time workers.

The reason is simply cost, he says.

"If we were to keep our health insurance program exactly like it is with no changes, every forecast we've looked at has indicated our costs will go up 24 percent," he says.

The profit per employee in restaurants is only $750 per year, says Richardson, much lower than in most other industries. So, he says, adding health insurance as a benefit for all employees over 30 hours, as the health care law requires, isn't feasible.

But for another restaurant owner, the calculation is very different. Jeff Benjamin has four restaurants in the Philadelphia area and is planning three more. This past spring he invited a dozen restaurateurs from other cities to meet in Chicago to brainstorm strategies to respond to Obamacare's employer mandate. Adding more part-time workers, less than 30 hours a week, was one idea, but Benjamin says it didn't get traction.

"I really only think one or two of the folks in the room suggested it," he says. "All of them kind of agreed that there are too many fixed costs to having an employee to make it worthwhile to go the part-time route."

Having two part-timers instead of one full-time employee doubles the cost of things like training, scheduling and uniforms, Benjamin says.

"I'm a big fan of [the idea that] full-time employees give you full-time work," he says. "And sometimes as you lower people's hours they may not be as committed. So, I love to be able to give someone a full-time job."

But Benjamin acknowledges that his staffing needs and profit margins are different from a fast-food chain like White Castle, and that's why they have different calculations about hiring part-timers. A number of big fast-food chains have said they'll use the strategy of increasing part-time workers, although one, Darden Restaurants, which owns Olive Garden and Red Lobster, has reversed course. Part of the reason was a public backlash to the decision that hurt their business.

A recent survey from the U.S. Chamber of Commerce found that half of the small businesses responding said they will reduce hours or add more part-timers in response to the law. But there are no hard data, so far, showing the industry moving to more part-time employees, says Scott DeFife, a spokesman for the National Restaurant Association.

"There's no big strategic part-time shift," he says. "In fact, data shows that in the past year average hours per employee is going up."

The National Restaurant Association hopes that Congress will use the one-year delay to make the law less burdensome to employers, DeFife says. But that would mean they'd provide fewer of their workers with health insurance.

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Transcript

ROBERT SIEGEL, HOST:

Many businesses that do not offer health insurance to all their employees breathed a sigh of relief earlier this month. That's when they learned that they'd have an extra year to comply with the new health care law. President Obama delayed the requirement for businesses with 50 or more employees. He did that after complaints that the plan was too complicated to implement by the original deadline.

NPR's John Ydstie has this story about how the restaurant industry is trying to preparer for the law, when it finally does go into effect.

UNIDENTIFIED WOMAN #1: Your order number is 512.

JOHN YDSTIE, BYLINE: It's lunchtime at the California Tortilla Restaurant in downtown Washington, D.C., and the line moves quickly as the staff works through the orders.

UNIDENTIFIED WOMAN #2: All right, three beef tacos, soft-shell, rice and beans. Is that for here or to go?

UNIDENTIFIED WOMAN #3: (unintelligible)

UNIDENTIFIED WOMAN #2: To go? Total is 10.35, ma'am.

UNIDENTIFIED WOMAN #3: OK.

UNIDENTIFIED WOMAN #2: Thank you.

YDSTIE: The restaurant's corporate managers say they're still figuring out what strategy to use to comply the new law's mandate to provide health insurance for all workers who put in at least 30 hours a week; whether they should trim hours, hire more part-timers or leave things unchanged.

But management at another fast food chain has made a decision.

JAMIE RICHARDSON: My name is Jamie Richardson. I'm vice president of White Castle, which means I get to help sell hamburgers for a living.

YDSTIE: Right now, about half of White Castle's 9,600 employees are full-time and already covered by the company's' health care plan. Richardson says none of those workers will lose a job or benefits as a result of the new health care law.

RICHARDSON: If you're full-time at White Castle, you're going to stay full-time at White Castle. But as we look to the future when the new health care law takes effect, we are considering at that point for new hires, letting those people know up front - hey, at this point we're only able to hire part-time team members.

YDSTIE: Richardson says the reason is simple: Cost.

RICHARDSON: If we were to keep our health insurance program exactly like it is with no changes, every forecast we've looked at has indicated our costs would go up 24 percent.

YDSTIE: Richardson says the profit per employee in restaurants is only $750 per year, much lower than in most other industries. So, he says, adding health insurance as a benefit for all employees over 30 hours, as the health care law requires, isn't feasible.

But for another restaurant owner, the calculation is very different. Jeff Benjamin has four restaurants in the Philadelphia area and is planning three more. This past spring, he invited a dozen restaurateurs, from other cities, to meet him in Chicago, where they worked through strategies to respond to ObamaCare's employer mandate. He says adding more part-time workers, under 30 hours a week, was one idea but it didn't get traction.

JEFF BENJAMIN: I really only think one or two of the folks in the room suggested it. All of them kind of agreed that there are too many fixed costs to having an employee to make it worthwhile to go the part-time route.

YDSTIE: Benjamin says having two part-timers instead of one full-time employee doubles costs like training, scheduling and uniforms. And then there's commitment.

BENJAMIN: I'm a big fan of full-time employees give you full-time work. And sometimes, as you lower people's hours, they may not be as committed. So I'd love to be able to give someone a full-time job.

YDSTIE: But Benjamin acknowledges that his staffing needs and profits margins are different from a fast food chain like White Castle. And that's why they have different calculations about hiring part-timers.

A number of big fast food chains have said they'll use the strategy, although one, Darden Restaurants, which owns Olive Garden and Red Lobster, has reversed course. Part of the reason was a public backlash to the decision that hurt their business.

A recent survey from the Chamber of Commerce found that half of the small businesses responding said they will reduce hours or add more part-timers in response to the law. But Scott DeFife, a spokesman for the National Restaurant Association, says there's no hard data so far showing his industry is moving to more part-time employees.

SCOTT DEFIFE: There's no big strategic part-time shift. In fact, data shows that in the past year, average hours per employee is going up.

YDSTIE: But DeFife also says the National Restaurant Association hopes that Congress will use the one-year delay to make the law less burdensome for employers. Of course, that would mean they'd provide fewer of their workers with health insurance.